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Binance, Other Crypto Players Shun Multichain as Bridging Rumors Swirl

With facts hard to come by, a coterie of crypto players are taking action.

Key players in the crypto ecosystem are shoring up their defenses amid growing concerns over the state of Multichain, a major venue for moving assets between different blockchains.

Four days after apparent technical issues started throttling some users’ ability to withdraw tokens from the protocol, wild rumors over Multichain’s safety and the fate of its team are filling the void created by the platform’s silence. A single tweet blaming some cross-chain breaks on “force majeure” has only added fuel to the widespread speculation that something is amiss.

The light-on-facts landscape is pushing a growing number of entities to mitigate risk now – regardless of Multichain’s true state. Their responses are highlighting how crypto bridges create the potential for a world of hurt that goes well beyond the flashiest and well-trodden risk to bridges (getting hacked by North Korea).

The situation is compounded by Multichain’s prominence among bridges. It is the third-largest bridging protocol by transfer volume and total value locked, according to data from Messari and DeFiLlama.

Like most bridges, Multichain uses a mint-and-lock mechanism to move assets between the 92 blockchains it interacts with. For example, if a holder of USDC stablecoin bridges the asset from Ethereum to Fantom via Multichain, the token gets locked up in a smart contract on Ethereum and then issued anew on Fantom – in this case, as a “wrapped” token called anyUSDC.

Multichain’s anyUSDC and other wrapped USDC tokens like it dominate 50% of Fantom’s stablecoin market, according to DeFiLlama. This is in spite of all USDC on Fantom being “bridged” assets instead of “native” that Circle issues directly onto the chain. Thus, all the USDC tokens on Fantom are reliant on bridges to retain their value.

This setup works as long as the bridge does. At the height of Multichain’s troubles this week, it didn’t, and wrapped USDC tokens on Fantom lost their dollar peg. Some arbitrage traders told CoinDesk they bought wrapped USDC tokens at a 30% discount during the fracas over Multichain, which is responsible for 80% of the stablecoins on Fantom.

Binance, the world’s largest crypto exchange, seemingly pointed to the risks of non-native assets Friday with a tweet imploring traders to “remember to check you trust the issuer behind stablecoins you hold.”

The Fantom ecosystem’s high reliance on Multichain hasn’t spooked market participants into a mass exodus quite yet. Overall numbers like total value locked remain rather steady despite some outflows to other chains, according to data from terminal-builder Parsec.

“The multichain bridge is fully operational and safe with Fantom. Whatever is happening internally with multichain has no impact on the bridged assets on Fantom,” Michael Kong, CEO of the Fantom Foundation, told CoinDesk.

Squid Router – a bridging protocol built on Axelar that unlike Multichain uses swaps instead of wrapped tokens to move value across chains – also reported a surge in activity during the Multichain madless. Bridge transactions on Axelar itself increased sixfold during the spike, people familiar with the matter said.

But Multichain’s method of wrapping assets to bridge them has spooked players beyond the stablecoin markets. On Thursday, Binance said it would temporarily suspend deposits in 10 Multichain-bridged tokens “while we await clarity from the Multichain team.”

Bridging aggregation service Li.Fi also took preventative measures yesterday and shuttered access to Multichain.

Amid all this Multichain’s namesake asset MULTI has suffered. It was trading at $3.8 at press time, a 54% drop from where it was before the crisis of confidence began.

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Bitcoin Moves Little on the Week Despite Debt Deal, Inflation Concerns

Bitcoin trades flat to move one step closer to logging its first losing month of 2023. Ether rises slightly but also seems headed for a negative May.

Bitcoin and ether took slightly divergent paths during the last full week of May. While ether rose 1.5%, bitcoin moved little to recently trade at about $26,700, a little below where it stood last Friday.

Ether’s year-to-date performance gap to bitcoin has narrowed to single digits with ETH gaining 52% YTD versus BTC’s 60% increase. Since May, the ETH/BTC ratio has increased 6.7%. Still both assets are in line to have their first losing month of 2023.

BTC and ETH’s seven-day performance ranked them sixth and 14th among cryptocurrencies with a market cap of $1 billion or more.

The weekly leaders were Render Token (RNDR) and Tron (TRX), up 21.9% and 7.6% respectively, while LDO and ALGO lagged, declining 8.5% and 9.3%

Investors have been focusing on President Joe Biden and U.S. House Speaker Kevin McCarthy’s debt ceiling negotiations. While it’s widely expected that a deal will be reached ahead of the June 1 deadline, the two sides had yet to reach an agreement going into the Memorial Day weekend.

Markets were also weighing Friday’s Personal Consumption Expenditure (PCE) report showing U.S. prices rising more than expected in April. Core PCE, which excludes volatile food and energy prices, rose 0.4%, versus expectations of a 0.3% increase.

The unexpected increase reduces the likelihood that the Federal Open Market Committee (FOMC) will pause interest rate hikes during its June 14 meeting.

According to the CME Fedwatch tool, the probability that interest rates would remain at the current target rate of 5%-5.25% declined from 83% to 38% this week. The probability of a 25 basis point increase rose from 17% to 62%.

Drawdowns across multiple sectors

All six sectors in the CoinDesk Market Index fell this week, with the Smart Contract Platform sector declining the least (0.2%). The Culture and Entertainment sector had the roughest week, falling 4%.

Of the 156 individual assets across the base of CMI sectors, only 20 finished the week in positive territory. Another standout, albeit one with a market cap of less than $1 billion, was decentralized computation token ARPA, up 88%. ARPA is trading 167.2% higher on the month, and over 200% higher over the last 12 months.

Fleeing U.S. Crypto Firms ‘Welcome,’ French Regulator Says #prizmabet

100-odd companies could be registered in France as the just-agreed MiCA EU crypto legislation beds in, Financial Markets Authority officials said

PARIS, France – Crypto companies fleeing U.S. regulatory uncertainty have been offered a welcome in France, by officials boasting a regulatory framework that offers relative predictability.

The European Union member already boasts around 74 registered crypto companies – a number that could surge to 100 as a last round of firms seek to anticipate the EU’s Markets in Crypto Assets rules that were formally signed off by ministers earlier Tuesday.

“In France, we are proud to be pioneers” with the crypto service asset provider regime, known as PSAN, that was legislated in 2019, Benoît de Juvigny, Secretary General of the Autorité des marchés financiers (AMF), told reporters Tuesday.

“If American players want to benefit, in the very short term, from the French regime, and from the start of 2025 from European arrangements, clearly they are welcome,” he added. “We have good relations and discussions with our U.S. counterparts.”

The legal certainty now apparently achieved in France is only recently gained. In January, lawyers were warning that legislative amendments proposed by the national Senate – eventually watered down – could kill innovation.

There are also still some gray areas: French lawmakers are still pondering what kinds of crypto social media influencers should be able to promote. The EU is still deliberating on how to regulate financial services that have no central entity, and Juvigny said the AMF will produce a paper with some ideas in the coming weeks.

But essentially the legal framework is all but nailed down, contrasting sharply with the situation across the Atlantic. In recent weeks, players including Bittrex and Coinbase have quit the U.S., or threatened to, citing the uncertain regulatory environment caused by active regulatory enforcement, combined with no obvious prospect of a crypto law from Washington.

Not easy

France may be predictable and stable, but that’s not the same as being easy or straightforward.

Seventy-four companies, including Binance and Bitstamp, have already been awarded a registration demonstrating basic governance and money-laundering compliance. Firms can also take the further step of seeking a license, if they have enough capital, though no company has yet acquired one.

Under new transitional measures agreed earlier this year as a bridge to MiCA, companies applying as of July will undergo a “reinforced” registration, in which they have to prove they have resilient IT systems and a conflict of interest policy. MiCA itself, set to take effect in 2025, grants the right to serve the pan-European market, and extends wider to include services such as crypto investment, advice and portfolio management.

That web of four different coexisting regimes is complex, as de Juvigny himself concedes – but officials are keen to bat off complaints from the industry that some requirements are impossible to meet in practice, and procedures unduly lengthy.

Complaints

Contrary to some industry concerns, officials say it’s indeed possible for crypto firms to get commercially insured to AMF standards. “I’ve seen the contracts with my own eyes,” Stéphane Pontoizeau, a director at the AMF responsible for supervising market infrastructure and intermediaries, told reporters.

Those who do their homework by studying the AMF’s guidelines will find they can acquire a new status in just a few months, Pontoizeau said – adding that those who find it takes longer often didn’t get their house in order.

With dozens likely waiting in the wings to get registered, there could be around a hundred companies on the “start line” in France before MiCA kicks in, Pontoizeau said – though some, headquartered in other EU member states or serving only the French market, may not seek a full AMF license under the EU law.

And for some, France’s rigor may be the point – such as Circle, the stablecoin issuer which has applied for registration from the AMF, and said it also wants to seek a license.

Together with the ACPR, the arm of the French central bank responsible for vetting crypto companies’ money laundering compliance, “the AMF … have a strong reputation for being a major market regulator that is forward thinking but manages risk well,” Circle’s Vice President for Policy and Regulatory Strategy Teana Baker-Taylor told CoinDesk. “It’s not a light touch jurisdiction.”

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Quotations have been translated from French.

Edited by Nikhilesh De.

China’s Top Prosecution Agency Says Although Not Banned NFTs Have #prizmabet Crypto-Like Attributes

NFT collections, targeted in new published guidelines, have been gaining popularity in China since the country prohibited the trading of cryptocurrencies.

China’s highest national agency responsible for legal prosecution has warned non-fungible token (NFT) digital collections share “the attributes of virtual assets,” which are banned in the country.

The Supreme People’s Procuratorate of the People’s Republic of China published its guidelines for the treatment of NFTs on Monday, recommending stronger “risk research and judgment” and to “accurately punish crimes.”

After China cracked down on local crypto trading and cut off banks from offering crypto-related services in 2021, the local industry all but vanished – until NFTs stormed the scene, and started gaining popularity in China as “digital collectibles,” that didn’t fall into the same basket as high-risk crypto. But the prosecution agency’s new report warns otherwise.

“While it has high popularity, it is very likely to cause financial risks, management risks, network security risks, etc., especially the legal risks. Prosecutors are paying close attention,” the report from Monday said.

NFTs attach a unique digital identifier to virtual or real items, that allows proof of ownership to be recorded on a blockchain. China’s prosecution agency argues owners cannot really “enjoy” the ownership, particularly of digital art, which can still be replicated and distributed.

“From the perspective of property rights, consumers do not enjoy the ownership of the NFT digital assets they purchase in the sense of civil law, and consumers cannot prohibit others from accessing, copying or disseminating the digital assets mapped by NFT,” one author of the report said. “What consumers enjoy is only an exclusive right to prohibit others from tampering with the ownership of the NFT recorded on the blockchain.”

Despite China’s aversion to crypto, the country is looking to harness the blockchain technology that underlies virtual assets to build out national digital infrastructure.

“As a new application of blockchain technology, NFT has certain development potential,” the prosecution agency said.

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Edited by Parikshit Mishra.

Axie Infinity’s Token Jumps 12% After Firm Lists Game on Apple App Store #prizmabet

The dollar valued locked in the open futures contracts tied to AXS has surged to highest since February, signaling an influx of new money into the market.

Blockchain-based play-to-earn project Axie Infinity’s native cryptocurrency AXS rallied after CoinDesk reported on Axie’s card-based strategy game debuting on the Apple app store.

AXS surged over 12% from $7.16 to $8.04 after the news, becoming the top gainer on CoinDesk Indices’ leaderboard. At press time, AXS was on track for its best single-day percentage gain since Jan. 22. The cryptocurrency fell by over 3% in April, registering its third consecutive monthly decline amid the token unlock and risk aversion in the broader market.

Initially, Apple store users across Latin America and Asia in countries including Argentina, Colombia, Peru, Mexico, Venezuela, Indonesia, Malaysia and Vietnam will have access to the card-based game called Axie Infinity. The game already has 1.5 million installations across all platforms. Sky Mavis, the creator of the play-to-earn project, plans to expand the game’s outreach via Google and Apple mobile users.

Open interest spikes

AXS’s price rally was accompanied by a sharp increase in the notional futures open interest or the dollar value locked in open futures contracts. That’s a sign of an influx of new money into the market.

The notional open interest rose to over $75 million from nearly $40 million a day ago, reaching the highest since February, according to Coinglass.

However, the leverage appeared skewed to the bearish side, as funding rates in the perpetual futures market remained negative. Negative rates indicate the dominance of bearish short positions in the market.

Investors probably shorted perpetual futures contracts to protect the long position in the spot market from a sudden price drop, a reflection of lack of confidence in the sustainability of the price rally.

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Edited by Parikshit Mishra.

Indian Authorities Asked to Restore Crypto Exchanges’ Access to UPI #prizmabet

An Indian crypto exchange and a policy firm have separately asked the government to let crypto firms access the national Unified Payments Interface (UPI) after it was ostensibly suspended in 2022.

India’s government and central bank have received proposals asking to restore access of the Unified Payments Interface (UPI), a widely popular real-time payment system, to the crypto industry, several sources familiar with the matter have told CoinDesk.

Two proposals have already been made. A third proposal will be made “in the coming few weeks” by India’s newly formed crypto policy advocacy group, the Bharat Web3 Association (BWA), one individual familiar with the decision told CoinDesk.

The proposals, while not coordinated, appear to be the first major push by India’s crypto stakeholders to seek policy changes that govern the burgeoning industry since it suffered a series of blows in the form of harsh taxes, a crypto winter, and a “shadow ban.” The shadow ban saw Indian payment processors cut off banking access to crypto exchanges. UPI services were ostensibly suspended around the same time last year.

Since the pandemic, UPI adoption in India has rapidly increased with approximately 74 billion UPI transactions worth $1.5 trillion conducted in 2022. UPI allows citizens to pay for groceries and other goods using a QR code linked to their bank account. The system is used nationwide because merchants aren’t charged any fee for accepting UPI payments.

How Indian exchanges lost UPI access

The trigger for the payment rail crisis appeared to be Coinbase’s launch in India. On April 7, 2022, Coinbase launched its India operations with executives touting how easy it would be to trade on the company app with payments being processed by UPI. Hours after the event, the National Payments Corporation of India (NPCI) – the entity that governs UPI – tweeted to clarify that it was “not aware of any crypto exchange using UPI.” The NPCI is under the aegis of the nation’s central bank, the Reserve Bank of India (RBI).

One proposal to restore UPI access was made by an Indian crypto exchange that asked not to be identified because the matter hasn’t been made public. “We have submitted a representation with the NPCI, seeking the removal of restrictions on use of UPI services,” the crypto exchange said in a statement shared with CoinDesk.

The proposal was made shortly after India added crypto to anti-money laundering rules (PMLA or Prevention of Money Laundering Act), making crypto exchanges, non-fungible token (NFT) marketplaces and custody service wallet providers legally responsible for monitoring suspicious financial activities in March 2023. The jury on what this meant for India was divided. Legal experts said this gave teeth to the regulators overseeing the industry for the first time. At the same time, advocates of the crypto industry said this gave “more legitimacy” to the sector because “adding crypto to anti-money laundering rules is some semblance of regulation,” a senior industry participant said Monday.

“Our submission highlights that VDA (Virtual Digital Assets) service providers are now covered as ’reporting entities’ under the PMLA and are also registered with the FIU (Financial Intelligence Unit). We believe that these guardrails go a long way in helping secure VDA transactions and arresting malfeasance, if any,” the same crypto exchange’s statement said.

The second proposal, made in tranches over the past few weeks – both before and after India added crypto to anti-money laundering rules to different authorities – came from public policy advisory firm Black Dot, its founder Mandar Kagade told CoinDesk. The firm has previously collaborated with the Indian government. CoinDesk has seen an email from the Finance Ministry acknowledging Black Dot’s proposal and other emails confirming the firm sent the proposal to entities like the NPCI, the RBI and Jayant Sinha, the chairperson for the Standing Committee on Finance.

What Black Dot’s proposal contains

Black Dot’s proposal argues that UPI’s seamless user experience encourages transactions to remain onshore providing a visibility trail for regulators and law enforcement. Citing the Economic Times, it said 80% of digital asset transactions may be conducted on a peer-to-peer basis since the closure of UPI access. The proposal also says “arbitrarily denying a class of investors from accessing instruments of their choice via UPI when another group of investors has access to their choice (e.g., IPO) may also violate Article 14 (equality before the law).”

The proposal asks NCPI to group crypto exchanges based on how they meet agreed norms among banks.

It’s unclear whether authorities will restore UPI access to crypto exchanges but doing so would lend credibility to the space while making it much easier for retailers to start or continue trading on crypto exchanges.

CoinDesk has reached out to the Finance Ministry, RBI, NPCI and BWA for comment.

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Edited by Nikhilesh De and Sandali Handagama.

StanChart-Backed Zodia and LMAX Digital to Provide CoinShares With #prizmabet Crypto Trading Infrastructure

LMAX Digital and Zodia Custody are to provide institutional-grade trading infrastructure and custody to CoinShares.

A trio of European cryptocurrency firms are teaming up to bolster their digital asset trading offering to institutions.

Crypto exchange LMAX Digital and Standard Chartered-backed custodian Zodia Custody are to provide institutional-grade trading infrastructure and custody to digital asset manager CoinShares (CS.ST), according to an emailed announcement on Wednesday.

CoinShares will make use of LMAX’s trading capabilities and Zodia’s Interchange product, which allows clients to keep their assets on its platform, while their holdings are mirrored and available on an exchange for trading.

The three firms’ aim is to offer institutional adopters with the trading infrastructure, security and governance that they would expect in the traditional finance world, thereby assuaging concerns about the digital asset industry heightened by the events of the past year.

“This joint effort with Zodia Custody and LMAX Digital is aligned with our long-term strategy,” CoinShares CEO Jean-Marie Mognetti said. “We are committed to shape a reference standard for digital asset management.”

Edited by Parikshit Mishra.

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Ripple Buys Crypto Custody Firm Metaco for $250M #prizmabet

Metaco will continue to operate as an independent business unit led by CEO and founder Adrien Treccani.

Blockchain firm Ripple has acquired Swiss-based crypto custody provider Metaco for $250 million, the company said in a statement on Wednesday.

The purchase will allow Ripple to expand its offerings by incorporating the technology to custody, issue, and settle tokenized assets. Metaco offers customers crucial and secure custody infrastructure, allowing institutions to scale new business models in the crypto economy.

Diversifying into custody solutions will bring new revenue opportunities, Ripple said, adding that the acquisition is part of its strategy to broaden its presence beyond the U.S and its uncertain regulatory landscape.

In 2020, Ripple and some of its executives faced a lawsuit from the U.S. Securities and Exchange Commission regarding the unregistered sale of approximately $1.3 billion worth of XRP tokens.

Ripple CEO Brad Garlinghouse recently estimated that the legal battle will cost the company around $200 million, while also cautioning crypto entrepreneurs against establishing their businesses in the U.S. While the judge residing on the Ripple lawsuit, said on Tuesday that the regulator cannot seal documents tied to former official William Hinman’s 2018 speech on crypto and securities.

Read more: SEC Can’t Seal Docs Tied to Hinman’s Ether Speech, Judge in Ripple Suit Rules

According to a company spokesperson, the acquisition was financed through a combination of cash and Ripple equity.

“Metaco is a proven leader in institutional digital asset custody with an exceptional executive branch and a truly unmatched customer track record,” said Brad Garlinghouse, CEO of Ripple.

Ripple will become the sole shareholder of Metaco, which will continue to operate as an independent business unit led by its founder and CEO Adrien Treccani.

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Edited by Parikshit Mishra.

Tether Says It Will Buy Bitcoin for Stablecoin Reserves Using Realized Profits #prizmabet

The company, which issues the $82 billion USDT stablecoin, reported $1.48 billion of net profits in 2023 Q1 and revealed $1.5 billion in BTC holdings.

Stablecoin issuer Tether will regularly buy bitcoin (BTC) for its stablecoin reserves using a portion of its profits starting this month as part of a new investment strategy focused on the largest cryptocurrency by market capitalization, the firm announced on Wednesday.

Tether said it will allocate up to about 15% of the realized profits from investments – excluding any unrealized price appreciation of its reserve assets – to purchase BTC and will add the tokens to the reserve surplus.

The company will custody the BTC stash on its own, without using any third-party custodians, according to the statement.

The development comes after Tether, the company behind the largest stablecoin on the market, the $82 billion USDT, revealed last week that it holds $1.5 billion of BTC and $3.4 billion of gold among the assets that backs the value of USDT and its smaller stablecoins. Some 85% of the reserves are held in cash and cash-like assets such as U.S. Treasury bonds, according to its 2023 Q1 attestation.

Stablecoins, now a $131 billion asset class, have become a crucial building block of the cryptocurrency infrastructure, facilitating trading and transactions between government-issued fiat money and digital tokens by keeping their price anchored to an external asset, usually to the U.S. dollar.

BTC investments

The firm’s BTC purchase campaign aims to strengthen and diversify the stablecoin reserves, while capitalizing on its price appreciation as an investment, the press release said.

“Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential,” Paolo Ardoino, chief technology officer of Tether, said in a statement. “Our investment in bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology.”

The company said it will exclusively utilize realized profits from its investment operations for buying BTC, disregarding unrealized capital gains. It means that the firm considers “only the tangible gains from its operations,” consisting of the difference between the purchase price and net proceeds from an asset sale or, in case of maturing assets such as Treasury bills, between the purchase price and the reimbursed amount, per the statement.

Tether said that it also focuses on developing communication systems, energy and bitcoin mining infrastructure among its smaller investments.

For years, Tether has been criticized within the crypto industry for its lack of transparency about its reserves and controversial investment decisions.

However, the firm’s flagship token USDT emerged as a safe haven in March as the U.S. regional banking crisis hit Circle’s USDC, the second largest stablecoin. The sudden implosion of Silicon Valley Bank (SVB) left a part of USDC’s cash reserves frozen at the bank over a weekend, and several stablecoins lost their dollar peg temporarily in a knock-on effect.

Tether came out of the calamity as a clear winner by maintaining its price stability due to its perceived disconnection from U.S-based banks, being incorporated in the British Virgin Islands and Hong Kong. USDT’s circulation has grown 24% this year while most rivals have suffered significant outflows.

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Edited by Parikshit Mishra.

First Mover Americas: Axie Infinity Rallies After Apple App Store Debut #prizmabet

The latest price moves in crypto markets in context for May 17, 2023.

This article originally appeared in First Mover, CoinDesk’s daily newsletter putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.

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Blockchain-based play-to-earn project Axie Infinity’s native cryptocurrency AXS ralliedafter the company’s card-based strategy game debuted on the Apple app store. AXS surged over 12% from $7.16 to $8.04 on the news, becoming the top gainer on CoinDesk Indices’ leaderboard. The game will initially launch in the Apple store across Latin America and Asia. Bitcoin traded down on Wednesday, struggling to hold the $27,000 mark as investors keep a close eye on developments around raising of the debt ceiling in the U.S. The world’s largest cryptocurrency by market value has lost 9% over the past month.

Crypto companies fleeing U.S. regulatory uncertainty have been offered a welcome in France, by officials boasting a regulatory framework that offers relative predictability. The European Union member already boasts around 74 registered crypto companies. “In France, we are proud to be pioneers,” said Benoît de Juvigny, Secretary General of the Autorité des marchés financiers (AMF), noting his country’s crypto service asset provider regime – known as PSAN – was passed in 2019, “If American players want to benefit, in the very short term, from the French regime, and from the start of 2025 from European arrangements, clearly they are welcome,” he added. “We have good relations and discussions with our U.S. counterparts.”

Using distributed ledger technology (DLT) in securities markets could create savings north of $100 billion per year, a report produced by a major traditional-finance lobby group has said. In a paper published Tuesday evening, the Global Financial Markets Association (GFMA) called for regulators to allow the technology that underpins crypto to aid collateral management, asset tokenization and sovereign bond markets.“ Distributed ledger technology holds promise for driving growth and innovation,” said Adam Farkas, Chief Executive of GFMA, whose affiliates in the U.S., Europe and Asia count major players such as JPMorgan Chase, HSBC and Nomura among their members.

Chart of the Day

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Edited by Stephen Alpher.